Chart1

Figure 20.7: Dividend Yields on S& P 500 - 1960 to 1994

6.00%
Dividend Yield

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Year

Page 1
 Chart2

Figure 20.1: Aggregate Earnings and Dividends: S & P 500 - 1960-1994

35.00

30.00

25.00

20.00
$

Earning
s*

15.00

10.00

5.00

0.00
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Year

Page 2
 Chart3

Implied Risk Premium: U.S. Equities

7.00%
Implied Premium (%)

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Year

Page 3
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.70381468
R Square 0.4953551
Adjusted R S 0.46567011
Standard Erro 0.00767584
Observations 37

ANOVA
df SS MS F Significance F
Regression 2 0.00196635 0.00098318 16.6870543 8.9281E-06
Residual 34 0.00200323 5.8919E-05
Total 36 0.00396959

CoefficientsStandard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0.02043957 0.00410783 4.97575511 1.8466E-05 0.01209146 0.02878769 0.01209146 0.02878769
X Variable 1 0.28552576 0.05093033 5.60620237 2.7989E-06 0.18202293 0.38902858 0.18202293 0.38902858
X Variable 2 -0.20878349 0.11638756 -1.79386431 0.08173279 -0.44531131 0.02774433 -0.44531131 0.02774433
Upper 95.0%
 2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Implied Premium for US Equity Market: 1960-2020

2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991

Year
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
Implied Premium
 Implied ERP and Risk free Rates
25.00%

Expected Return on Stocks = T.Bond Rate + Equity Risk

20.00% Premium

ERP at the end of

2020 does not
look abnormal,
Since 2008, the expected but the expected
15.00% return on stocks has not rerturn on stocks
moved by much, but the has not been this
risk free rate has low in 60 years.
dropped, increasing
equity risk premiums.
10.00%

5.00%
T. Bond Rate

0.00%
1962
1963
1965
1967
1968
1970
1971
1972
1973
1975
1976
1977
1978
1980
1981
1982
1983
1985
1986
1987
1989
1990

1993
1994
1995

1998
1999
2000

2003
2004
2005

2008
2009
2010

2013
2014

2018
2019
1961

1964
1966

1969

1974

1979

1984

1988

1991
1992

1996
1997

2001
2002

2006
2007

2011
2012

2015
2016
2017

2020
Implied Premium (FCFE) T.Bond Rate
 Historical Impl Premiums

Date updated5-Jan-19
Created by: Aswath Damodaran, adamodar@stern.nyu.edu
What is this Implied Equity Risk Premiums (by year) S&P 500
Home Page: http://www.damodaran.com
Data website:http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html

Year Earnings Yield Dividend Yield S&P 500 Earnings* Dividends*Dividends + BuybacksChange in EarningsChange in DividendsT.Bill Rate T.Bond Rate Bond-Bill Smoothed Growth
1960 5.34% 3.41% 58.11 3.10 1.98 2.66% 2.76% 0.10% 2.45%
1961 4.71% 2.85% 71.55 3.37 2.04 8.60% 2.91% 2.13% 2.35% 0.22% 2.41%
1962 5.81% 3.40% 63.1 3.67 2.15 8.79% 5.21% 2.73% 3.85% 1.12% 4.05%
1963 5.51% 3.13% 75.02 4.13 2.35 12.75% 9.45% 3.12% 4.14% 1.02% 4.96%
1964 5.62% 3.05% 84.75 4.76 2.58 15.23% 10.08% 3.54% 4.21% 0.67% 5.13%
1965 5.73% 3.06% 92.43 5.30 2.83 11.20% 9.42% 3.93% 4.65% 0.72% 5.46%
1966 6.74% 3.59% 80.33 5.41 2.88 2.23% 1.96% 4.76% 4.64% -0.12% 4.19%
1967 5.66% 3.09% 96.47 5.46 2.98 0.85% 3.37% 4.21% 5.70% 1.49% 5.25%
1968 5.51% 2.93% 103.86 5.72 3.04 4.81% 2.09% 5.21% 6.16% 0.95% 5.32%
1969 6.63% 3.52% 92.06 6.10 3.24 6.66% 6.49% 6.58% 7.88% 1.30% 7.55%
1970 5.98% 3.46% 92.15 5.51 3.19 -9.72% -1.61% 6.53% 6.50% -0.03% 4.78%
1971 5.46% 3.10% 102.09 5.57 3.16 1.15% -0.74% 4.39% 5.89% 1.50% 4.57%
1972 5.23% 2.70% 118.05 6.17 3.19 10.76% 0.71% 3.84% 6.41% 2.57% 5.21%
1973 8.16% 3.70% 97.55 7.96 3.61 28.93% 13.24% 6.93% 6.90% -0.03% 8.30%
1974 13.64% 5.43% 68.56 9.35 3.72 17.48% 3.14% 8.00% 7.40% -0.60% 6.42%
1975 8.55% 4.14% 90.19 7.71 3.73 -17.54% 0.30% 5.80% 7.76% 1.96% 5.99%
1976 9.07% 3.93% 107.46 9.75 4.22 26.39% 13.10% 5.08% 6.81% 1.73% 8.19%
1977 11.43% 5.11% 95.1 10.87 4.86 11.53% 15.07% 5.12% 7.78% 2.66% 9.52%
1978 12.11% 5.39% 96.11 11.64 5.18 7.07% 6.60% 7.18% 9.15% 1.97% 8.48%
1979 13.48% 5.53% 107.94 14.55 5.97 25.01% 15.23% 10.38% 10.33% -0.05% 11.70%
1980 11.04% 4.74% 135.76 14.99 6.44 3.01% 7.81% 11.24% 12.43% 1.19% 11.01%
1981 12.39% 5.57% 122.55 15.18 6.83 1.31% 6.08% 14.71% 13.98% -0.73% 11.42%
1982 9.83% 4.93% 140.64 13.82 6.93 -8.95% 1.58% 10.54% 10.47% -0.07% 7.96%
1983 8.06% 4.32% 164.93 13.29 7.12 -3.84% 2.76% 8.80% 11.80% 3.00% 9.09%
1984 10.07% 4.68% 167.24 16.84 7.83 26.69% 9.85% 9.85% 11.51% 1.66% 11.02%
1985 7.42% 3.88% 211.28 15.68 8.20 -6.91% 4.74% 7.72% 8.99% 1.27% 7.89%
1986 5.96% 3.38% 242.17 14.43 8.19 -7.93% -0.15% 6.16% 7.22% 1.06% 5.54%
1987 6.49% 3.71% 247.08 16.04 9.17 11.10% 11.99% 5.47% 8.86% 3.39% 9.66%
1988 8.20% 3.68% 277.72 24.12 10.22 50.42% 11.49% 6.35% 9.14% 2.79% 9.76%
1989 6.80% 3.32% 353.4 24.32 11.73 0.83% 14.80% 8.37% 7.93% -0.44% 9.58%
1990 6.58% 3.74% 330.22 22.65 12.35 -6.87% 5.26% 7.81% 8.07% 0.26% 7.39%
1991 4.58% 3.11% 417.09 19.30 12.97 -14.79% 5.03% 7.00% 6.70% -0.30% 6.34%
1992 4.16% 2.90% 435.71 20.87 12.64 8.13% -2.59% 5.30% 6.68% 1.38% 4.67%

Page 8
 Historical Impl Premiums

1993 4.25% 2.72% 466.45 26.90 12.69 28.89% 0.41% 3.50% 5.79% 2.29% 4.73%
1994 5.89% 2.91% 459.27 31.75 13.36 18.03% 5.34% 5.00% 7.82% 2.82% 7.23%
1995 5.74% 2.30% 615.93 37.70 14.17 18.74% 6.00% 3.50% 5.57% 2.07% 5.65%
1996 4.83% 2.01% 740.74 40.63 14.89 7.77% 5.10% 5.00% 6.41% 1.41% 6.13%
1997 4.08% 1.60% 970.43 44.09 15.52 8.52% 4.25% 5.35% 5.74% 0.39% 5.45%
1998 3.11% 1.32% 1229.23 44.27 16.20 0.41% 4.37% 4.33% 4.65% 0.32% 4.60%
1999 3.07% 1.14% 1469.25 51.68 16.71 16.74% 3.16% 5.37% 6.44% 1.07% 5.75%
2000 3.94% 1.23% 1320.28 56.13 16.27 8.61% -2.65% 5.73% 5.11% -0.62% 3.71%
2001 3.85% 1.37% 1148.09 38.85 15.74 30.08 -30.79% -3.24% 1.80% 5.05% 3.25% 3.56%
2002 5.23% 1.83% 879.82 46.04 16.08 29.83 18.51% 2.15% 1.20% 3.81% 2.61% 3.57%
2003 4.87% 1.61% 1111.91 54.69 17.88 31.58 18.79% 11.19% 1.00% 4.25% 3.25% 5.35%
2004 5.58% 1.60% 1211.92 67.68 19.407 40.60 23.75% 8.54% 2.18% 4.22% 2.04% 4.90%
2005 5.47% 1.79% 1248.29 76.45 22.38 61.17 12.96% 15.32% 4.31% 4.39% 0.08% 6.16%
2006 6.18% 1.77% 1418.3 87.72 25.05 73.16 14.74% 11.93% 4.88% 4.70% -0.18% 5.93%
2007 5.62% 1.89% 1468.36 82.54 27.73 95.36 -5.91% 10.70% 3.31% 4.02% 0.71% 5.03%
2008 7.24% 3.11% 903.25 65.39 28.05 67.52 -20.78% 1.15% 1.59% 2.21% 0.62% 2.11%
2009 5.35% 2.00% 1115.10 59.65 22.31 37.43 -8.78% -20.46% 0.14% 3.84% 3.70% 0.28%
2010 6.65% 1.84% 1257.64 83.66 23.12 55.53 40.25% 3.63% 0.13% 3.29% 3.16% 3.33%
2011 7.72% 2.07% 1257.60 97.05 26.02 71.28 16.01% 12.54% 0.03% 1.88% 1.85% 2.75%
2012 7.18% 2.13% 1426.19 102.47 30.44 75.90 5.58% 16.99% 0.05% 1.76% 1.71% 2.93%
2013 5.81% 1.96% 1848.36 107.45 36.28 88.13 4.86% 19.19% 0.07% 3.04% 2.97% 5.01%
2014 5.49% 1.92% 2058.90 113.01 39.44 101.98 5.17% 8.71% 0.05% 2.17% 2.12% 2.77%
2015 5.20% 2.11% 2043.94 106.32 43.16 106.10 -5.92% 9.43% 0.21% 2.27% 2.06% 2.96%
2016 4.86% 2.01% 2238.83 108.86 45.03 108.67 2.39% 4.33% 0.51% 2.45% 1.94% 2.64%
2017 4.67% 1.86% 2673.61 124.94 49.73 108.28 14.77% 10.44% 1.39% 2.41% 1.02% 3.22%
2018 5.92% 2.14% 2506.85 148.34 53.61 136.65 18.73% 7.80% 2.37% 2.68% 0.31% 3.24%
2019 5.03% 1.82% 3230.78 162.35 58.80 150.50 9.44% 9.68% 1.55% 1.92% 0.37% 2.57%
2020 3.68% 1.51% 3756.07 138.12 56.70 127.78 -14.92% -3.57% 0.09% 0.93% 0.84% 0.74%

* Earnings and dividends numbers each year reflect the estimated numbers as of the end of the year. These numbers get updated later in the year but I do not update the numbers in this spreadsheet, since I would not have had acce

Period ERP ERP + Riskfree Rate

1960-2020 4.21% 10.06%
2001-2020 4.95% 8.01%
2011-2020 5.53% 7.68%
End of 2020 4.72% 5.65%

Page 9
 Historical Impl Premiums

Implied Premium (FCFE with

Implied Premium (DDM)
Analyst Growth EstimateImplied Premium (FCFE) sustainable Payout) ERP/Riskfree Rate

2.92% 2.92% 1.24

3.56% 3.56% 0.92
3.38% 3.38% 0.82
3.31% 3.31% 0.79
3.32% 3.32% 0.71
3.68% 3.68% 0.79
3.20% 3.20% 0.56
3.00% 3.00% 0.49
3.74% 3.74% 0.47
3.41% 3.41% 0.52
3.09% 3.09% 0.52
2.72% 2.72% 0.42
4.30% 4.30% 0.62
5.59% 5.59% 0.76
4.13% 4.13% 0.53
4.55% 4.55% 0.67
5.92% 5.92% 0.76
5.72% 5.72% 0.63
6.45% 6.45% 0.62
5.03% 5.03% 0.40
5.73% 5.73% 0.41
4.90% 4.90% 0.47
4.31% 4.31% 0.37
5.11% 5.11% 0.44
4.03% 6.75% 3.84% 0.43
3.36% 6.96% 3.58% 0.50
4.18% 8.58% 3.99% 0.45
4.12% 7.67% 3.77% 0.41
3.85% 7.46% 3.51% 0.44
3.92% 7.19% 3.89% 0.48
3.27% 7.81% 3.48% 0.52
2.83% 9.83% 3.55% 0.53

Page 10
 Historical Impl Premiums

2.74% 8.00% 3.17% 0.55

3.06% 7.17% 3.55% 0.45
2.44% 6.50% 3.29% 0.59
2.11% 7.92% 3.20% 0.50
1.67% 8.00% 2.73% 0.48
1.38% 7.20% 2.26% 0.49
1.20% 12.50% 2.05% 0.32
1.65% 12.00% 2.87% 0.56
1.73% 10.30% 3.62% 2.91% 0.72
2.29% 8.00% 4.10% 4.73% 1.08
2.12% 11.00% 3.69% 4.74% 0.87
2.02% 8.50% 3.65% 4.86% 0.86
2.20% 8.00% 4.08% 5.22% 0.93
1.97% 12.50% 4.16% 6.12% 0.89
2.06% 5.00% 4.37% 4.59% 1.09
4.05% 4.00% 6.43% 6.92% 2.91
2.60% 7.20% 4.36% 4.64% 1.14
2.24% 6.95% 5.20% 6.09% 1.58
2.71% 7.18% 6.01% 8.34% 3.20
2.47% 5.27% 5.78% 7.30% 3.28
2.03% 4.28% 4.96% 4.99% 1.63
2.24% 5.58% 5.78% 5.48% 2.66
2.46% 5.51% 6.12% 5.16% 2.70
2.41% 5.54% 5.69% 4.50% 2.32
2.36% 7.05% 5.08% 4.75% 2.11
2.50% 4.12% 5.96% 5.55% 2.22
2.03% 3.96% 5.20% 5.06% 2.71
1.65% 5.42% 4.72% 4.94% 5.08

readsheet, since I would not have had access to them at the end of the year.

Page 11